The Regulatory Coherence Chapter of the Trans-Pacific Partnership Agreement: Making the Link Between Adherence to Good Regulatory Practice Principles and Promoting International Trade and Regulatory Cooperation, by Jeff Weiss

In November 2015, the Office of the United States Trade Representative (USTR) released the full textof the Trans-Pacific Partnership Agreement (TPP), a free trade agreement that was negotiated by the United States with eleven countries from Asia and the Americas: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The Agreement was signed by U.S. Trade Representative Michael Froman and his counterparts from the other 11 TPP partners in Auckland, New Zealand, on February 4, 2016. The Administration is working to submit the Agreement to Congress for approval as soon as possible this year.

TPP has been designed to address new and emerging issues that haven’t been taken up in trade agreements previously, as the United States and its TPP partners seek to build a high-standard framework for trade and investment throughout the Asia-Pacific. One of the more innovative parts of TPP is the chapter on Regulatory Coherence, a first for a U.S. free trade agreement. The chapter – whose provisions are fully consistent with the U.S. regulatory system — represents a ground-breaking first step in codifying as a global norm that countries should establish central coordination and review mechanisms for regulation and follow “good regulatory practices,” such as assessing regulatory impact, to help achieve domestic policy objectives and promote regulatory cooperation. The chapter’s inclusion demonstrates the growing realization across the globe that the principles and processes a country follows in developing its regulations are important for a country’s climate for trade and investment, economic growth and employment, and regulatory quality, as well as for its regulators’ ability to cooperate with regulators in other countries to address common challenges.

The Regulatory Coherence Chapter also presents an unparalleled strategic opportunity for the United States in a world where different regulatory approaches essentially compete for adherents. At present, there are two dominant global regulators – the United States and Europe – with China emerging as a potential third.

TPP countries account for 40 percent of global GDP and a third of world trade, and these large numbers will likely increase should other Asia-Pacific nations seek to join the pact. Consequently, the inclusion of regulatory disciplines in TPP would provide increased leverage for U.S. regulatory approaches to be adopted in bilateral, regional, and multilateral contexts (particularly since it is unlikely that the WTO will be able to create consensus around new rules in this area in the short- and medium-term). This, in turn, would help increase U.S. exports, since U.S. companies can already comply with U.S. regulatory requirements. It would also increase levels of environmental, health, and safety protection around the globe, as U.S. rules are among the most protective, and would indirectly benefit U.S. citizens when they purchase or use imported products.

The provisions of TPP’s Regulatory Coherence chapter are fully consistent with the U.S. regulatory system, and the United States will have to make no changes to comply with TPP obligations in this chapter. Moreover, the United States has made clear it will only cover U.S. federal-level regulatory measures for purposes of commitments under this TPP chapter.

Following is a short discussion of three key aspects of the chapter:

(1) Importance of central coordination

The chapter encourages each TPP country to have “processes or mechanisms to facilitate the effective interagency coordination and review of proposed covered regulatory measures” and to “consider establishing and maintaining a national or central coordinating body for this purpose.” Some countries (like the United States) may have an institution to provide central coordination and review of regulations. Others may opt not to create or maintain institutions, but instead to create or maintain a process or processes to accomplish the same goal.

Generally speaking, such processes or mechanisms should enable:\

review of such regulatory measures to determine whether they were developed using “good regulatory practices” (see below);

improved interagency consultation and coordination to help avoid potential overlap, duplication, and inconsistency; and

development of recommendations for systemic improvements with respect to regulation.

These commitments should appear familiar to Section members, as they are very similar to provisions contained in Executive Order 12866 (“Regulatory Planning and Review,” September 1993).

(2) Use of Good Regulatory Practices

The Regulatory Coherence chapter also encourages TPP countries to follow “good regulatory practices” when developing proposed regulatory measures that are covered by the chapter. These practices — which are consistent with the principles and spirit of Executive Order 12866, as well asExecutive Order 13563 (“Improving Regulation and Regulatory Review,” January 2011) and Executive Order 13609 (“Promoting International Regulatory Cooperation,” May 2012) – include:

assessing the regulatory impact of proposed measures exceeding a particular threshold of economic impact. According to the chapter provisions, those assessments should identify the need for regulation; examine feasible alternatives; examine costs, benefits, risks, and distributive impacts of the alternatives; explain the reasons for selecting a particular alternative; and rely on the best available scientific, technical and other information;

ensuring that regulations are plainly written;

taking into account potential impacts on small and medium sized enterprises;

making information on new measures publicly available;

reviewing measures at regular intervals to determine whether they should be revised or repealed;

providing annual public notice of measures a country reasonably expects to be issued over the following year; and

considering the use of regulatory measures of other TPP countries, as well as relevant developments in international and regional fora.

It is also important to note that the chapter affirms each country’s “sovereign right to identify its regulatory priorities and establish and implement regulatory measures to address these priorities, at the levels that [it] considers appropriate,” and emphasizes “the role that regulation plays in achieving public policy objectives.” The chapter recognizes that some regulatory diversity is likely and not necessarily inappropriate. TPP countries have different circumstances that influence the substance of, and processes for developing, regulation – for example, they may have different legal structures, levels of development, and social and cultural mores — and those circumstances may lead them to adopt different regulatory approaches. And nothing in the chapter requires a country to use another country’s regulatory measure as a basis for its own regulation.

(3) Enabling Regulatory Cooperation

A third theme of the chapter is promoting regulatory cooperation, both directly and indirectly, among the TPP countries to facilitate trade and help regulators achieve their objectives. The chapter establishes a Committee on Regulatory Coherence of the TPP Parties, and lays out an illustrative list of cooperative activities to be undertaken between and among the countries, which includes technical exchanges, training programs, strengthening cooperative activities between regulators, and consideration of potential future sector-specific regulatory cooperation initiatives.

In addition, the Committee will consider issues relating to implementation and operation of the chapter. Each country must regularly notify the Committee with regard to how it is implementing the Chapter, and discuss ways it might improve its implementation. Such notifications of implementation are intended to involve peer review and information-sharing and, where appropriate, might usefully help identify opportunities for technical assistance and other cooperative activities.

Lastly, the Committee is charged with establishing “appropriate mechanisms to provide continuing opportunities for interested persons of the Parties to provide input on matters relevant to enhancing regulatory coherence.” While some of the TPP Parties, like the United States, have well-developed systems in place to promote regulatory coherence, other TPP members, especially the emerging economies in TPP, are still developing their domestic regulatory practices. For Section members that have significant experience with the Administrative Procedure Act or have provided technical assistance to U.S. States and other countries on developing their regulatory systems, engaging with TPP members under the framework of the Committee on Regulatory Coherence, once the agreement is approved by Congress and enters into force, could be an excellent opportunity to provide expertise that will help shape good regulatory practices around the world for decades to come.

Jeff Weiss is Senior Advisor for Standards and Global Regulatory Policy to U.S. Secretary of Commerce Penny Pritzker and co-chair of the International Trade and Customs Committee of the ABA’s Section of Administrative Law and Regulatory Practice. He previously served as the Associate Administrator of OIRA and as deputy lead negotiator for the TPP Regulatory Coherence Chapter at USTR.